3 Reasons Not To Have Kids Inherit a Business | #RichLifeLawyer Show 80
I am the proud father of three kids. I think it would be really amazing if one, or all of them, one day wanted to run my business.
But that isn’t the default outcome for me, and it shouldn’t be for you either.
Today we talk about three reasons not to have kids inherit a business.
To give it to you real fast, here are the three reasons:
- Your kids may not be qualified to inherit (and run) your business;
- Your kids may not want to inherit your business; and
- There might be someone out there who is a better fit to run the business
Now, don’t get me wrong, I’m not saying you shouldn’t share the spoils of your business with your family.
I’m just saying there are other ways to do it than giving them your business straight away.
To get the full scoop, listen in!
Christopher Small wants to help you live a rich life now and leave a rich legacy when you are gone. He wants you to have your cake and eat it too. That’s what the #RichLifeLawyer Show is all about. It’s his way of helping you protect your family, create wealth right now, and establish generational wealth, for free. You’ll find information here on estate planning, financial planning, productivity, finance, self-improvement, family protection, tax avoidance, and anything else Christopher thinks will help improve your quality of life (and after-life). Christopher is the owner of CMS Law Firm LLC, a Seattle estate planning law firm. CMS Law Firm does three things really well: (1) estate planning; (2) probate; and (3) trust administration. Christopher is a speaker, a blogger, a husband, a father, a golfer, and really good at helping people create the life of their dreams.
3 Reasons Not to Have Kids Inherit a Business Transcript
In this episode of the show we are talking about 3 reasons why having a family member succeed you in business is a bad idea.
I have 3 young kids right now and I must admit I think fondly about the day they want to take over one of my businesses and run them and its something that is kind of cool. It’s about legacy, that’s what is all about, right? Taking over for you, taking over your family business.
But, that is not always the best option, and there are 3 reasons why focusing specifically on family members to take over the business could be a bad idea.
The first reason and maybe the most important reason of all is that you may not have any kids that are qualified to run the business.
And these qualifications could come in many different ways. They could not have the education. They could not have the background. They could just not be good enough.
I know we never want to say that about our kids but they’re just not cut out to run the company. But, being able to really analyze that and dig in to that from an analytical perspective and not an emotional perspective is critically important because what it take is more that just company. It’s your family, it’s your legacy. It’s their ability to thrive and live in the future when you’re gone or when you retire.
It’s all about you too because when you retire you want this business to hopefully be able to continue to sustain your life and your goals and aspirations so, really make sure that you are evaluating your kids and whoever you decide to take over your business to make sure that they are qualified to do that.
The second reason that it is not a great idea to have a family member succeed in the business is they may not want to.
I can’t tell you how may come into the office and to do some estate planning and some business succession planning and they just tell me that they’re going to give the business to their kids, and I say “well, do they want to own the business? Do they know anything about the business? Are they interested in the business?”
And they say “well, no, not really,” and those two things don’t often don’t connect. We just assume that we are going to give everything we have to our family when we are gone and it may not be the best option, because you’re going to give the business to someone who doesn’t know how to run the it, who doesn’t have the same passion same as you do, who maybe doesn’t care about it.
They are going to do one thing. They are going to run that business right into the ground and like I said, its going to affect you, your family, it’s going affect your kids. So remember that when you’re thinking about selecting your kids to run your business.
The third reason you may not want to have your kids run your business is because there maybe someone better out there to do it, and that person might be sitting right in front of you.
Consider when you are thinking about business right now, have you had someone working for you for a long time that is loyal, that knows the business, that has shown that dedication and passion to you and your business over time, and that has the skills and the ability to take it over and run it and make it what it should be in the future.
To make it grow.
To build it up.
That is probably the right person for the job. At least that is someone that you want to consider and vet and have conversations with and talk to and run these things by because that is a diamond in the rough.
That could be your legacy.
Now, I will go more in depth on what I am about to talk about in another video, but just to handle an objection that I know is coming up. That is “The reason why I have to give it to my kids is that I want to maintain control over the company.”
It’s possible to have someone else to run your company and also maintain control over the company at the same time. You can even do that with your kids, you can create two shares of stock, two classes of stock, voting stock and common stock.
You can also simply elect or hire or promote a CEO and the family is basically the board of directors and they evaluate the business from that stand point. We are not running the business on a day to day operations standpoint, and you don’t have to worry about cash flow and insurance and HR, hiring or firing and business cycles.
You are simply there to make sure that the business is going to right direction, that the company culture is maintained in the way that you want, and the family legacy continues to live on from a bigger picture kind of a stand point. So, don’t think that having someone else run your business, or even take a stake in the business, is going to ruin it for your family, because that just isn’t true.
If you want to get in touch to me and talk more about it, you can contact me at 206-659-1512. You can email me chris@cmslawfirm.com. And, if you want to dive in to this topic more, business succession planning, and some other things to look out for, I have a free webinar, free training and you can go and check that out and register if you want at cmslawfirm.com/business.
Thanks for your time and I’ll talk to you soon.
I would add to the above good ideas, that an inheritance should come with an education as to the responsibility of the recipient. Kids should be taught how to invest and how to spend wisely.